Monday, 12 October 2015

Markets rally but may not last

Markets rallied strongly last week.

The MSCI All-Country World Index rose 4.4 percent. The S&P 500 rose 3.3 percent. The STOXX Europe 600 jumped 4.3 percent. The MSCI Emerging Markets Index surged 7 percent.

The Bloomberg Dollar Spot Index, which measures the US dollar's performance against a basket of 10 major counterparts, fell 1.4 percent last week, with the US currency slumping to a three-week low against the euro.

Conversely, emerging-market currencies performed well last week. The rupiah completed its best week since 2001 and the ringgit appreciated the most since 1998.

The rebound in emerging markets could hold, according to Geoffrey Barker, manager of the Counterpoint Asian Macro Fund.

“Much depends on China,” Barker said in an an e-mail to Bloomberg. “I doubt that another plunge in emerging-market currencies is imminent because it is too soon to argue for a hard landing in China.”

Indeed, Thomas Schroeder, founder and managing director of Chart Partners Group Ltd, thinks that Chinese stocks will climb in the next few months. “As oil starts to move and materials follow, investors will by default feel more positive about China,” he said.

However, he also thinks the rebound will not last, citing technical patterns. “This is a bear market rally.”

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